An electronic payment service provider is an entity that provides the electronic commerce service of completing payment on behalf of a user of the electronic payment service of that service provider. The user on whose behalf a payment is completed is a payor, and an entity receiving the payment is a payee. An enrolled user of a service provider is known as a subscriber of the service provider. A subscriber can be an individual, a business, or another type of organization.
A payee is often a biller. A biller is an entity that renders a service, or provides goods, to a customer on a credit basis, then, either simultaneously or subsequently, prepares and delivers a bill to request payment from the customer. Delivery of a bill can be completed by either traditional paper-based delivery, typically via a postal service, or electronic bill presentment. A payee can also be an entity that does not issue bills.
A service provider receives a payment request electronically, either directly from subscriber, or from another entity acting on behalf of a subscriber. A payment request, at a minimum, specifies a payor (possibility indirectly), a payee (possibly by reference), and a payment amount. A payment date is also typically included, although it can be assumed to be “as soon as possible” if omitted. A payment request may be originated at any one of several electronic user interfaces, including automated telephone system interfaces, Web-based interfaces, PC application-based interfaces, PDA-based interfaces, television/set-top box-based interfaces, and mobile phone-based interfaces.
After receipt of a payment request, a service provider processes the request to complete the payment. At the conclusion of payment processing the service provider issues remittance to a payee. Remittance is a combination of a credit to a payee and remittance advice associated with the credit.
A credit accomplishes a transfer of funds to a payee to fulfill a payment request. A credit may be performed through a paper process (check or draft), or an electronic funds transfer (EFT) process. In conventional electronic payment service techniques the funds may come directly from a demand deposit account (DDA) associated with a subscriber, or from a DDA associated with the payment service provider. As will be discussed further below, in some electronic payment service techniques funds come from a credit card issuer having issued a credit card to the payor. A DDA could be a checking account, a money market account, or any other type account from which an account holder can, at will, issue an order that funds held therein be withdrawn for credit elsewhere. An electronic funds transfer is the process of causing funds to move between accounts at different financial institutions across one or more networks. A financial institution is an entity that maintains financial accounts that can be debited and/or credited as a result of transaction activity. Financial institutions include banks, savings and loans, credit unions, and brokerage houses. Networks linking financial institutions include the Federal Reserve's Automated Clearinghouse (ACH) network.
The Federal Reserve System is the central bank of the United States of America, formed by an act of Congress. It consists of twelve Reserve Banks located in major cities throughout the United States. The ACH network electronically links the Federal Reserve Banks with financial institutions throughout the United States to support electronic funds transfer between the financial institutions. CheckFree's Direct Send network, MasterCard's RPPS network, Visa's ePay network, and Princeton eCom's network are examples of remittance networks, each of which links a service provider with one or more payees.
Remittance advice is a description of a credit that allows proper payment posting to a specific account, or sub-account, in a payee's Accounts Receivable ledger. Remittance advice may be tightly coupled with an instrument used to accomplish the credit (e.g., information printed in a memo field on a check or draft, or information included in a field in an electronic funds transfer file transmitted over a network linking financial institutions), or it may be somewhat decoupled from the credit, such as a paper document delivered to a payee, separate from a credit, or an electronic file transmitted directly to the payee separate from a credit. Remittance advice typically includes at least information identifying a payor, information identifying the payor's account with the payee, and a payment account.
A managed payee is a payee about whom a service provider has information that enables remittance to that payee to be handled in some improved/optimal fashion. The information typically includes one or more of account schemes for improved reliability of Accounts Receivable posting at the managed payee, account ranges for remittance center identification, other information for remittance center identification, payee preferred credit form (paper or electronic), payee preferred remittance advice form (paper or electronic, and format/syntax), and electronic communication parameters for delivery of electronic credits and/or electronic remittance advice.
Managed payee information, collected by a service provider from managed payees and/or other sources, is typically stored in a managed payee database. A managed payee database includes information identifying each managed payee known to a service provider, along with the information collected about each managed payee.
An unmanaged payee is a payee about whom a service provider does not maintain information which aids in the handling of remittance. An electronic payee is a managed payee that can receive remittance electronically. A merchant is a payee that issues bills for services rendered or goods purchased. Thus, a merchant is a special class of payee, a payee that issues bills. A merchant can be an unmanaged merchant or a managed merchant. If a merchant is a managed merchant, it can further be an electronic merchant.
For many service providers, payment processing dictates the form of remittance issued, i.e. electronic or paper. Some service providers use payment processing to determine a form of remittance based solely upon a status of a payee as a managed payee, with remittance issued in accordance with a managed payee's wishes. Thus, during payment processing, such a service provider determines if a payee identified in a payment request is a managed payee (or managed merchant). If so, information stored in a managed payee database is retrieved and remittance is issued in accordance with the stored information. If the retrieved information indicates that remittance should be issued electronically, the remittance is issued accordingly. And, if the retrieved information indicates that remittance should be issued on paper (check or draft), the remittance is likewise issued accordingly.
If a payee is not determined to be a managed payee, remittance will typically be issued on paper. Alternatively, an unmanaged payee is invited to join the “managed payee community”, and the payment is held until joining. If an unmanaged payee does not join in a certain timeframe, the payment is either issued on paper, or the payment is cancelled. When payment is issued by check to an unmanaged payee some service providers automatically issue a check drawn on a DDA associated with the payment service provider, typically known as a corporate check, as the form of remittance. Still other payment service providers perform risk processing to determine whether paper remittance will be a corporate check, or a draft drawn on a DDA of a payor. A draft is a special class of check, one prepared by an entity other than an account holder of the account upon which the draft is drawn.
In risk processing, a payment request is evaluated against a set of rules that determines whether the credit can be issued “at risk” to the electronic payment service provider. An “at risk” credit is a credit from an account belonging to a service provider. Risk processing is only performed in those instances where a service provider is not assured of receiving funds in at least an amount of a payment made on behalf of a payor. If a determination is made that a payment will not be issued “at risk”, payment is made by a draft drawn on a payor's DDA prepared by a service provider. This could happen even if payment processing determined that the payment could have been issued electronically.
A service provider can be assured of receiving funds in a “good funds” model of payment processing. In a good funds model an electronic payment service provider performs a debit authorization against a payor's DDA before issuance of a credit. That is, an electronic payment service provider first ensures that funds from a payor's account are available before a credit is issued on behalf of that payor.
A service provider can also be assured of receiving funds in a “guaranteed funds” model of payment processing. In a guaranteed funds model an entity other than a service provider commits to reimburse the service provider for any credits issued for which an associated debiting of a payor's DDA fails. The guaranteeing entity is typically the payee, although it may be another entity such as a consumer service provider, to be discussed further below, or a financial institution at which the payor's DDA is maintained. Typically, funds are guaranteed up to some limit. For payments beyond that limit, the service provider must perform good funds processing or risk processing.
For other service providers a status of a payee as a managed payee is but one factor considered in payment processing to determine a form of remittance. Some service providers perform risk processing to determine if an “at risk” credit will be issued, which could cause remittance to be issued on paper (draft) even if the payee is an electronic payee.
Other service providers, potentially the same ones that also use the results of risk processing as a factor, first determine if a payee is an electronic payee, but then use the results of account scheming (a process of verifying and/.or altering a supplied account number in accordance with an account number pattern, or “scheme”) to determine a form of payment. Additionally, other criteria may be used in determining a form of payment, by these or by other service providers.
Typically, a service provider has five mechanisms to complete payment to a payee on behalf of a payor. Selection of a mechanism to complete payment is often made during payment processing. The first is ACH—ACH payment, which is all electronic, in which a service provider transmits both the credit portion and the remittance advice portion of remittance via the ACH network for delivery. The second is ACH-Direct Send payment, which is also all electronic, in which a service provider transmits the credit portion via the ACH network, and transmits the remittance advice portion directly to a payee via a network different than the ACH. Alternatively, in some ACH-Direct Send payments, remittance advice is delivered to a payee in hard copy. The third is Third Party payment, which is also all electronic, in which a service provider transmits both the credit portion and the remittance advice portion via a third party remittance network for delivery. The fourth is Corporate Check payment, which is paper, in which a service provider delivers a check to a payee, the check being drawn on a DDA belonging to the service provider. Remittance advice is printed upon, or associated with, the corporate check. The fifth is Draft payment, which also is paper, in which a service provider delivers a draft to a payee, the draft being drawn on a DDA belonging to a payee and having printed remittance advice printed thereon, or associated therewith.
An electronic biller is a biller that presents at least a subset of its bills, for at least a subset of its customers, electronically, either directly or through a biller service provider (BSP). A BSP is an entity that facilitates at least some aspect of electronic bill presentment on behalf of the electronic biller. A BSP can also be an electronic payment service provider. Such service providers are known as electronic billing and payment (EBP) service providers. Electronic bill presentment can be via any one of several electronic user interfaces, including Web-based interfaces, PC application-based interfaces, PDA-based interfaces, mobile phone-based interfaces, and television/set-top box-based interfaces.
Some service providers only make payments to a finite set of managed payees with whom they have an established relationship. These managed payees may or may not be electronic billers. Such payment service providers are said to offer a “closed” electronic payment service.
Still other service providers make payments to any payee, as long as the service provider knows the payee's name and address, typically obtained from a payor. Such service providers are said to offer an “open”, or “pay anyone”, electronic payment service. Typically, a payment to a payee that is not an electronic payee has to be a paper (check or draft) payment. Alternatively, the service provider may extend an invitation to the non-electronic payee to join its community of electronic managed payees, holding payment until either the payee joins (after which the payment is released electronically) or a time period passes (after which the payment is released in paper form, or abandoned, or returned).
The services offered by electronic payment service providers and EBP service providers have become widely accepted. Millions of bills are electronically presented to subscribers each month, and millions of payments are completed on behalf of subscribers each month. Many subscribers pay all of their bills utilizing an electronic payment service provider or an EBP service provider. Thus, a service provider has become a central point of bill payment activity for these subscribers.
The electronic commerce service of on-line retail purchase has also become widely accepted. In on-line retail purchase a merchant presents goods for sale via an interactive Web site. A customer selects, via the interactive Web site, goods for purchase. The interactive Web site typically includes a payment presentation for the customer to provide payment information. Payment for goods purchased on-line is primarily by credit card, though other payment mechanisms are sometimes available. These other payment mechanisms include Cash On Delivery and traditional billing.
In credit card payment for on-line retail purchases, the merchant maintains a relationship with a financial institution that is part of a credit card network and is also an acquirer. That is, the merchant is a customer of the acquirer and can thus accept credit card payment, the processing of which is handled through the acquirer. A payment presentation for credit card payments includes fields for a customer (the purchaser) to enter information associated with his or her credit card, including at least credit card number, and typically an expiration date and billing address. The merchant, after receiving this information via the payment presentation, forwards such, along with a purchase amount, to the credit card network for authorization and/or settlement. The credit card network propagates the payment request to the customer's credit card issuer. If the request is a settlement request, the credit card issuer debits the purchaser's credit card account. Upon successful authorization, the network credits the merchant's account via the acquirer, then the customer's credit card issuing financial institution and the merchant's acquiring financial institution settle between themselves. The debit is reflected in the purchaser's next credit card statement as a payment to the merchant, and the statement serves as a bill to collect payment from the purchaser.
Traditionally, billers did not accept credit card payment in payment of bills, typically because of credit card acceptance fees. However, with the widespread acceptance of electronic payment services and on-line retail purchases some billers now accept credit card payment through biller direct Web sites and telephone interfaces as a customer convenience. Much like online retail purchases, a credit card based payment of a bill is reflected in a payor's next credit card statement as a payment to the biller (the payor must still pay the credit card bill). Credit card issuers desire to increase the number of payments made via credit card, because of the associated fees collected by the issuers.
Accordingly, a need exists for a technique to increase the number of payments made via credit card.
Recently, some electronic payment service providers have begun to support limited payment by credit card. In one service provider technique of credit card based payment a service provider processes credit card based payments on behalf of billers. That is, a service provider does not offer the payment service to subscribers. Rather, the service provider merely provides a payment interface on behalf of a biller. Such a service provider sometimes supports multiple payment interfaces, including telephone-based and Web-based interfaces, each branded according to a single biller. According to this technique, a customer of a biller accesses a biller branded payment interface and provides credit card information that is utilized in payment of only that biller. In other words, this is not a pay anyone payment service.
In another service provider technique of credit card payment a service provider acts as a gateway to a credit card network. The biller is a customer of an acquirer. The service provider merely passes a payment request to the credit card network, which in turn processes the request and pays the biller. In this technique the service provider does not offer the payment service to subscribers. Rather, the service provider merely provides a payment interface on behalf of a biller. In this technique, a customer of a biller accesses a biller branded payment interface and provides credit card information that is utilized in payment of only that biller. In other words, this too is not a pay anyone payment service.
In yet another service provider technique of credit card payment a service provider processes credit card based payments to a wider range of payees, including billers and non-billers. In this technique, the service provider makes payments, including credit card based payments, on behalf of subscribers to only other subscribers. Thus, this technique too is not a pay anyone payment service. Utilizing either of these three techniques, payors have a limited number payees to which payment can be made be credit card.
Accordingly, a need exists for a technique to make credit card based payments to a greater number of payees, including billers and non-credit card accepting payees, or even any payee.
In the payment service techniques described above in which the biller is not a customer of an acquirer a service provider is a customer of an acquirer. Once a service provider receives credit card information from a payor, the service provider forwards this information, along with a payment amount, to a credit card network. As described above, the credit card network propagates the request to the payor's credit card issuer, which then debits the payor's credit card account. The credit card network also triggers a credit to the service provider via its acquirer. Note that the credit card issuer does not pay the intended payee. Rather, the service provider issues a credit to the intended payee, either by a corporate check, or an electronic funds transfer via the ACH network, drawn on a service provider DDA. The service provider acts as a master merchant, purchasing funds via credit cards and then distributing those funds through a DDA.
Credit card based payments made according to these techniques in which the service provider is a customer of an acquirer result in a transaction being reflected in a payor's next credit card statement as a payment to the service provider, not a payment to the intended payee. Many payors utilize credit card statements to track spending. Credit card based payments made in accordance with these two techniques cannot be utilized to precisely track spending because information identifying a service provider, not an intended payee, is contained in credit card statements.
Accordingly, a need exists for an electronic payment service technique in which a credit card based payment submitted through a service provider not acting as gateway is reflected in a credit card statement as a payment to a payee, not the service provider.
No service provider technique of credit card payment exists in which the advantages of a service provider acting as both a gateway to a credit card network and a master merchant are achieved. Such a technique would facilitate not only an increase in the number of credit card payments, but also a greater number of payees a payor would be able to pay by credit card.
Accordingly, a need exists for a dual mode electronic payment service technique in which the advantages of credit card gateway techniques and master merchant techniques are both achieved.